NCLT rejects insolvency application due to missing certificate, stresses timely compliance

The NCLT rejected an application under Section 9 of the Insolvency and Bankruptcy Code due to technical deficiencies, specifically the absence of a required certificate from the financial institution confirming the unpaid operational debt by the corporate debtor. Despite granting time to rectify the defect, the applicant failed to provide the necessary certificate within the stipulated period. The NCLT emphasized the mandatory nature of this certificate requirement and highlighted the importance of timely rectification of defects, citing potential rejection of incomplete applications.

---

---

Issues: Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency resolution process.

The judgment pertains to an application filed under section 9 of the Insolvency and Bankruptcy Code, 2016 seeking the initiation of Corporate Insolvency resolution process against a corporate debtor. The applicant alleged that despite fulfilling all obligations diligently, the respondent defaulted in making payments, leading to a significant outstanding amount. The respondent admitted to owing a substantial sum but failed to make payments despite reminders and legal notices. Subsequently, a winding-up petition was filed before the Hon’ble Delhi High Court, which was later transferred to the NCLT. The applicant sought dismissal of the petition with liberty to file a fresh one under the Insolvency and Bankruptcy Code, 2016, which was allowed. The applicant issued a demand notice as per the Code's provisions, but the respondent did not respond.

The NCLT informed the applicant of technical deficiencies in the petition, specifically regarding the filing of a certificate as required under section 9(3)(c) of the Code. Despite being granted time to rectify the defect, the applicant failed to provide the necessary certificate from the financial institution maintaining accounts of the operational creditor within the stipulated period. The NCLT highlighted that under sub-section (5) of Section 9, if the application is incomplete, the adjudicating authority must give the applicant 7 days to rectify the defect. Referring to a judgment by the NCLAT, it emphasized the importance of timely rectification of defects, failing which the application is liable to be rejected.

The NCLT observed that the applicant's submission of a bank statement did not fulfill the mandatory requirement of providing a certificate from the financial institution confirming the absence of payment of an unpaid operational debt by the corporate debtor. The Code explicitly mandates the furnishing of such a certificate under Section 9(3)(c), making it a mandatory requirement. The failure to provide this certificate rendered the application incomplete, leading to its rejection. Consequently, the NCLT rejected the application as incomplete, emphasizing the mandatory nature of the certificate requirement under the Code.

---